The Return of the Finance Crisis: What the Lehman Bankruptcy Means for Germany

The Return of the Finance CrisisWhat the Lehman Bankruptcy Means for Germany

The move by US investment bank Lehman Brothers to declare bankruptcy has set off a global earthquake on markets. The crisis is also threatening German financial institutions as well as the country's federal budget. SPIEGEL ONLINE has gathered the most important background information.

Traders work on the floor of the New York Stock Exchange: A Black Monday followed a Black Sunday.

The start of the week saw a banking earthquake, a Jet-Black Monday after a Black Sunday -- at least for the financing sector. Monday's opening on Wall Street saw Bank of America stocks tumble 13 percent, and shares of Citigroup lose 6 percent of their value. Washington Mutual, America's largest savings bank, lost over 15 percent of its market value, and Switzerland's UBS dropped over 20 percent. The biggest loss by far was suffered by the American International Group (AIG); in a single day, America's largest insurance company lost almost half of its market value.

The epicenter of the banking and market earthquake was in New York in the headquarters of a venerable banking establishment with German roots. On Monday morning, after a desperate fight for survival, Lehman Brothers, America's fourth-largest investment bank, declared bankruptcy. At the same time, people learned that Merrill Lynch -- America's third-largest and likewise crippled investment bank -- would be rescued by Bank of America.

In conversations with SPIEGEL ONLINE, finance experts have confirmed the seriousness of the situation -- and described the risks for Germany as well. "Lehman poses a risk for the international financial world," said Hans-Peter Burghof, professor of banking at the University of Hohenheim. "It's irresponsible to let a bank of this caliber simply go broke. That sends shockwaves all the way to Frankfurt (Germany's financial capital)."

In light of this new turbulence, even German Finance Minister Peter Steinbrück has been forced to evoke unusually clear images when he speaks. As he sees it, the very people who had prematurely spoken about there being a light at the end of the tunnel will now be forced to realize "that, in reality, it was the light of an oncoming train."

SPIEGEL ONLINE has compiled a brief overview of the origins of the current banking crisis and how it could affect Germany.